TrumpCare : Replacing Obamacare

There are parts of the TrumpCare model that don’t excite the GOP but do excite others. The problem is a total repeal of the ten sections of the Affordable Care Act will leave over 20 million people uninsured.  Trump states that he won’t allow that to happen, but what he will replace it with is not something that can be done overnight.

Further, some of Trump’s healthcare ideas are anti-GOP ideas – so there will be a bit of negotiation done between the legislative branches and the executive branch.

Obamacare is not likely to be repealed anytime soon.  Here are some of Trumps ideas:

The ability of Medicare to negotiate drug prices.  

By law Medicare cannot negotiate drug prices. Thus prices of drugs throughout the United States are higher than they are for other countries.

My father-in-laws one month supply of anti-cholesterol medicine, Crestor,  cost him $180 here, but in Canada he paid $40 for it, and in Hong Kong he paid $10 for it.  Same drug, same effect, same company.

The toughest negotiator in Europe is England that requires drug companies to prove their drug works better than the ones on the market. England also controls prices by capping the level of National Health Service spending on drugs each year and requiring the pharmaceutical industry to reimburse the NHS for any spending over those limits.

The GOP doesn’t like this idea, it is unlikely it will pass muster.

Tax Credit vs Tax Deduction for Health Insurance

If you have a tax credit for your health insurance then that amount is taken off the taxes you owe.  Suppose you owe $10,000 in federal taxes, but have a credit for $2500. Now you owe $7500.  But if you have a deduction, that is the amount taken off your income. So your tax savings is much less than if you had a credit.  Trump is proposing that the cost of health insurance be allowed as a tax deduction – unlike the proposal that Senator Rubio has proposed of having a tax credit.  The deduction favors those who are wealthy, the credit favors everyone.

Competition Across State Lines

Everyone loves competition, and doesn’t that drive the cost down? Turns out this is a simple idea that is simply wrong. First insurance companies would have to negotiate with the local physicians, hospitals, and clinics to have “in network” coverage. Second, the insurance companies would have to

Every state has its own set of regulations about what insurance companies should cover and what they should not. Trump has gone back and forth on this issue – one time stating that the US would overcome those state mandates and allow insurance companies to sell their product and another time stating that the insurance companies would have to.  Thus if your state requires you to cover advanced cancer treatment but the state where the insurance comes from requires basic cancer care you have to determine that ahead of time.

Price Transparency

Always a nice issue to see the prices of what you will pay for, or what your insurance company will pay for.  The problem is, few people shop for medical care the way you shop for groceries. Prices are negotiated now through your insurance company.  My father-in-laws cardiac stent had a bill for over $20,000 but his cost was $800 and Medicare paid a fraction of what was billed. The price the hospital charges Blue Cross for Banner Networks is more than for Abrazo networks, and yet most people choose a hospital not based on what the prices are, but location and if their doctors are on staff. Nor does it reflect in your bill if you choose to go to Abrazo, or the higher priced Banner Hospital.

Your hospital day charge at Banner might be $1500 per day and at Abrazo be $900 per day, but it does not change where a person obtains their care.

Prices confuse business people, but not healthcare professionals. We are use to the odd networks of prices. What most want to know when they go into a hospital is what it will cost them, not their insurance company.

When my son was born at Banner Good Samaritan, as I registered for my wife’s delivery I was told it would cost me $3000.  I used my American Express (needed the points for a future trip).  I had chosen the OB-GNY group that was taking care of my wife, and going to perform the C-section on her.  Even being in the healthcare business I would not have tried to go to a different facility with new doctors for the money.  I did ask them if I didn’t like my son when he was a teenager if I could return him.

Price transparency won’t reduce hospital charges, doctors fees, or other healthcare fees. It only does for luxury healthcare items.

Luxury healthcare such as plastic surgery, LASIK surgery, and high priced but elective items are influenced by the price.  Those providers are not under healthcare contracts and negotiate directly with you, or are prone to market forces. Few will choose a plastic surgeon based on price, but some will.

The argument about medical luxury items and the decrease in cost with competition is not proof that individuals can alter medical costs through competition. A better look is what happened to joint replacement.  When joint replacement was first offered in the United States it was not covered by insurance and people were paying tens of thousands of dollars for it.  Once insurance companies and Medicare covered the policy they used their sway to dramatically reduced the price.

Still government models to negotiate healthcare show that the cost of a hip replacement was $40,364 on average in the U.S. in 2012. The total hospital and physician cost for a hip replacement in the UK was $11,889 and in France, $10,927.

The use of government to negotiate prices for healthcare has resulted in lower costs around the world, but market-centered costs with individuals has never shown to reduce costs.

Medical Savings Accounts

Medical Savings Accounts are brought up as a way to have price transparency. If you are spending your own money then you are likely to negotiate. Forgetting that negotiation of health care costs are better done through large insurance companies that have large pools of people to work with. In Singapore there is a mandated amount that people must set aside for medical savings accounts- which is over six percent of their income. That means a family making $100,000 a year would be required to save $6000 a year in medical savings.  If your deductible is $3000 per year, then one member of the family will make it.  But if a person is making $30,000 a year then saving $1800 a year is not only a large bite out of income, but the costs are not.

There is no evidence that Medical Savings Accounts reduce health care costs and expenditures.  There is evidence that they will help with some legitimate day to day expenses, such as doctors visits, and the like.

Further, there is no indication if this would be a forced issue or elective.

Medicaid Block Grants

Allowing states to regulate their own Medicaid as a block grant is problematic. Would it allow states to decrease the roll of those working poor, or would Trump’s promise to not let anyone on the street be without healthcare come through?

Catastrophic Health Insurance

Not advocated by Trump, but often advocated by libertarian candidates, some GOP, and the Cato Institute provides a combination of Medical Savings Accounts and only use insurance for major medical issues – cancer, heart disease, or trauma. The model they use is Singapore – where the government funds 80% of healthcare (the US funds 67% of healthcare) and the wealthy have their own access to primary care physicians.

This is not a model to reduce costs (has not worked in Singapore) and is not a model that provides a safety net for the poor who cannot afford to have a medical savings account. It is also not a part of Trumpcare.

Dr. Terry Simpson About Dr. Terry Simpson
Dr. Terry Simpson received his undergraduate and graduate degrees from the University of Chicago where he spent several years in the Kovler Viral Oncology laboratories doing genetic engineering. He found he liked people more than petri dishes, and received his MD. Dr. Simpson, a renowned weight loss surgeon, is a leading advocate of culinary medicine. A frequent contributor to media outlets discussing health related topics and advances in medicine, he is also a proud dad, husband, author, cook, and surgeon “in that order.” For media inquiries, please visit www.terrysimpson.com.

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